FIPI Calls for Oil Cess Reforms to Boost Domestic Production

The Federation of Indian Petroleum Industry (FIPI) has requested reforms in India's crude oil cess system in the upcoming FY27 Union Budget. They argue the current levies on nomination and pre-NELP blocks hinder domestic production and propose a graded cess instead. FIPI also calls for removing other duties to facilitate the ease of doing business.

The Federation of Indian Petroleum Industry (FIPI) has urged the Indian government to reform the oil industry development (OID) cess on crude oil produced from nomination and pre-NELP exploration blocks. In the FY27 Union Budget representation, FIPI highlighted the adverse impact of the current 20 per cent ad-valorem levy introduced in 2016, noting its disproportionate burden on domestic production.

The OID cess does not apply to production from NELP, OALP, and DSF blocks, which benefit from fiscal incentives. FIPI argues this creates an unfair disadvantage for certain domestic producers and contradicts national initiatives like 'Make in India' and 'Atmanirbhar Bharat.' The association proposes a flexible cess model linked to crude prices, potentially alleviating the industry's cost strain and stabilizing government revenues.

Additionally, FIPI has advocated for the removal of the National Calamity Contingent Duty and Basic Excise Duty on domestically produced crude oil. These measures, originally temporary, have persisted, increasing the compliance burden without substantial revenue benefit. FIPI believes their removal would simplify the fiscal regime and improve the ease of doing business for upstream oil producers.